News

KFC hits China milestone, growth continues as economy slows

September 27, 2012

Yum! Brands' China Division has recently opened its 4,000th KFC restaurant. The milestone restaurant is located in Dalian, China, and commemorates the company's 25th anniversary in the country.

Yum! is the largest restaurant company in China and continues to pursue a broad-based development program. KFC's brand-building strategy focuses on customer service and localized menus offering value and variety. In addition to Original Recipe chicken, KFC China's menu includes beef, seafood, rice dishes, fresh vegetables, soups, breakfast and desserts.

"KFC's success in China is not only about the increase of store counts, but beyond that," said Sam Su, chairman and CEO of China Division, Yum! Brands Inc. "The transformation strategy of KFC is to connect deeply into consumers' lives. KFC does more than sell products, it interacts with consumers in a meaningful way to become a welcomed part of their lives."

Yum! Brands expects to open a record 700 units in China this year. According to the company's most recent earnings call, this substantial growth is expected to continue over the long term because the company currently has four restaurants per 1 million people in China, compared to 60 in the U.S., and the consumer class is expected to double in China to more than 600 million people by 2020. Same-store sales and AUVs for Yum's Chinese restaurants are also strong, and the company plans to expand dayparts and conveniences (nearly all KFCs in China serve breakfast and half deliver) to continue that trend.

Yum Brands' CEO David Novak said the development pipeline and capability have never been stronger than they are now in China.

However, there is an economic slowdown in China currently. Yum! president Richard T. Carucci said the biggest trend in the market is that Tier I, Tier II and coastal cities are growing at a slower rate.

"One thing we feel fortunate about is the new unit development, we're doing very well -- continue to do very well in Tier 3 through 6 cities. And those are generally performing at a higher rate. And right now, it's also higher same-store sales in those areas," Carucci added.

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